A sustainable business is one that delivers value for investors, customers and employees; improves the living standards of its employees and the communities it touches; makes wise use of natural resources; and treats people fairly. In many respects a sustainable business is simply a well-run business.
The modern sustainability movement first emerged thanks to business leaders like the Body Shops’, Anita Roddick, Ben and Jerrys’, Ben Cohen and Jerry Greenfield, and Stonyfield Farms’, Gary Hirshberg, who created clear social missions. These were not men and women in grey flannel suits. These baby boomers have alternately been blamed for, and credited with, just about everything new in business since they came of age and it is fair to add corporate responsibility to that list.
While the 1970’s and ‘80’s saw the emergence of the activist investor and business entrepreneurs with social missions, these movements were largely on the fringes of global business. Yes, the Body Shop was lauded, but it was also unique, as were companies like Patagonia, with its explicit social mission to use renewable materials produced by farmers and workers who shared in the profits.
If the 1990’s were a period in which many companies asked what sustainability is and why it should be important to them. The debate in the past 10 years has shifted rapidly to how it can be made to work for a company. The world economic forum’s annual meeting in Davos, Switzerland, is often used as a barometer of business and political leadership.
Beginning in 2005, one of the higher-profile announcements at Davos became the annual ranking of the Global 100 Most Sustainable Corporations in the world. While such lists are fodder for marketing initiatives, they also speak to just how important sustainability has become to businesses across the globe. In recent years, dozens of panels at the Forum have been devoted to various aspects of sustainability. There are a number of reasons that this was happening; however, the move toward integrating sustainability into the core of business practices received an even greater boost from the actions of corporate leaders. In the words of Marc Gunther, a former writer of Fortune magazine and well regarded green blogger, when CEOs like GE’s, Jeff Immelt, and Wal Mart’s, Lee Scott, embraced sustainability, “everything changed.” In a forceful speech to the National Press Club in Washington, DC in May 2006, Immelt hammered home the message that “Green is Green” – meaning profitable. GE endorsed a next generation of products and services designed to reduce environmental impacts of industry and consumers. By stating firmly that sustainability was an essential part of the company’s future, Immelt legitimized green business in a way that Greenpeace never could.
Companies who consider themselves industry leaders are actively adjusting their corporate strategy and operations to protect their brand, staying on top of sustainability and corporate responsibility rankings, be included in sustainability indexes and maintain top ratings from sell-side investment analysts and credit rating agencies. The stakes have never been higher due to the democratization of information via social media platforms such as Facebook, Justmeans and Twitter to name just a few.
Internal sustainability and corporate social responsibility (CSR) managers understand what it means to their brand, employee recruiting, investor relations and customers to rank poorly in global sustainability rankings, get dropped from sustainability indexes or be made an example of what not to do by the very viral and active social media sustainability network. Information – good, bad and ugly – gets passed around the globe in milliseconds and lasts a lifetime.
Today’s loss of faith and trust in companies and government is rooted in a lack of stakeholder engagement and transparency. The landscape is littered with those who thought they knew the right and best path forward but found themselves losing trust, respect and credibility. A sustainable business strategy is one that is informed and engaged. It requires leadership and courage to invite others inside to comment on, critique or oppose a company’s performance and business approach. These dialogues can inform a company’s long-term strategic view and often result in collaborative efforts that are good for the people, the environment, the economy and profits.
Mark Callaway is a senior vice president with the Indigo Group at Morgan Stanley in Atlanta. He may be reached at 404-264-4288 or at http://www.morganstanleyfa.com/callaway
Mark Callaway is a Financial Advisor with the Global Wealth Management Division of Morgan Stanley in Atlanta. The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives. Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Wealth Management, or its affiliates. Morgan Stanley Smith Barney, LLC, member SIPC.